Capital Acquisitions Tax (CAT) is also known as Inheritance Tax in Ireland or someimes it is called Gift Tax.
The current rate of inheritance tax in Ireland in 2020 is 33% – (it has been this rate since Dec 2012).
CAT is a tax that is charged on money or property that is gifted to or inherited by someone. The tax is charged on the recipient of the gift or inheritance. (Unlike the UK – where inheritance tax is charged on the estate of the deceased).
This tax applies to all property that is located in Ireland.
CAT also applies where the property is not located in Ireland but either the person giving the benefit or the person receiving it is resident or ordinarily resident in Ireland for tax purposes.
(More details later on double tax treaties for USA and UK inheritances.)
Inheritance Tax Thresholds:-
Inheritances or gifts under certain thresholds are tax-free.
There are 3 different threshold levels (groups) depending on the relationship between the recipient and the donor (disponer) of the gift or inheritance.
The group A threshold was increased in Budget 2020 – the threshold levels below are valid from October 9th 2019 onwards.
Group A: Tax-free threshold is €335,000 (increased from €320,000 in Budget 2020 ), This applies where the beneficiary is a…
- child (including an adopted child, stepchild and certain foster children) or
- minor child of a deceased child of the disponer (donor).
- Parents also fall within this threshold where they take an absolute inheritance (full and complete ownership) from a child.(not a gift) and the (II) the inheritance is taken on the death of the child. Otherwise, parents fall into Cat B.
Group B: the tax-free threshold is €32,500. This applies where the beneficiary is a …
- brother, sister,
- nephew, a niece
- lineal ancestor or lineal descendant of the disponer (eg grandchild).
Group C : the tax-free threshold is €16,250 and it applies in all other cases. This includes cousins, great nephews/ great nieces, non relatives.
Example 1 : A son inherits a house valued at €415,000 from a parent. This is €80,000 over the Group A threshold (€335,000) – so the tax bill would be 33% of €80,000 which is €26,400
Example 2 : Two children inherit a house worth €830,000.
The total inheritance tax threshold for both children is €335,000 times two ( €670,000). With 33% tax on the remaining €160,000 house value, this would result in an inheritance tax bill of €52,800 in total or €26,400 per child.
Example 3 : A nephew inherits a house worth €200,00. The tax-free threshold (Group B) is just €32,500 – so inheritance tax will be 33% of €167,500 – which will be €55,275
Inheritance tax can sometimes result in relatives who inherit property having to sell the property to pay the inheritance tax.
Inheritance Tax Exemptions :
- All Gifts or inheritances from a spouse or civil partner are exempt from this tax.
- Since 25 December 2016. – you are exempt from inheritance tax (CAT) on a house you inherit if all the following apply:
- the house was the only or main home of the person who died
- you lived in the house as your main home for the three years before the person’s death.
- you do not own, have an interest or a share in any other house, including one you acquired as part of the same inheritance
- the house remains your main home for six years after you receive the inheritance. (This does not apply if you are over 65.)
More details here
- 3. Parents taking an absolute inheritance (full ownership ) from a child have a Group A threshold. However, if the child took a non-exempt gift or inheritance from either parent in the previous five years, any inheritance taken by a parent from that child is exempt.
- Example : Philip receives a gift of £10,000 from his mother in 1999. Philip dies in 2002 and leaves his entire estate i.e. £1,000,000 to his father. The inheritance taken by the father is exempt.
Payment of CAT:
If you have received a gift or inheritance, then you are responsible for paying any Capital Acquisitions Tax that is due.
If you are not resident in Ireland, you must get an agent who is resident in Ireland, such as a solicitor, to take responsibility for the payment of CAT.
All gifts and inheritances with a valuation date in the 12-month period ending on the 31 August must be paid and filed by 31st October of that year.
That means that if you inherit between January and August, you have to pay by October 31st the same year. If you inherit between September and December, you don’t have to pay the inheritance tax bill until 31st August the following year.
Late filing or payment:
If you don’t file a tax return and pay by Oct 31 there is a late filing charge (5% if you delay 2 months or less and 10% after that)
Late payment interest charges of 0.0219% per day will also apply , (equivalent to 8% a year)
You pay CAT on the total of all the gifts or inheritances that you have received throughout your lifetime.
To calculate the CAT on the latest benefit or inheritance, you need to add all inheritances or gifts received under the same group threshold from 5 December 1991.
So for example – if a nephew got a €22,500 inheritance in 2002 – then they still have €10,000 of the €32,500 threshold left. Then if the nephew gets a €20,000 inheritance from another uncle in 2020 – the “left over” €10,000 from the first inheritance will apply and the tax will only be charged on €10,000 of the €20,000.
More details here
If you have inherited some money in another country – you will probably need to transfer that money into Euros. Or if you have inherited money in Ireland and you live elsewhere you may also need to convert the money to your home currency.
You should take a look at our page on Where to get the Best Exchange Rates
Inheriting Property Abroad
You may have to pay inheritance tax (CAT) in Ireland and in another country on the same event. Where countries have different taxation rules, the same gift or inheritance may become subject to tax in more than one country.
In Ireland you can claim a credit against CAT if you have paid tax on foreign property. This is subject to conditions. Ireland has treaties with several countries, including the United Kingdom (UK) and the United States of America.
- Irish Inheritance Tax on USA Property
An agreement between Ireland and the USA covers Inheritance Tax . Ireland can only tax property that is located abroad if the person giving the inheritance is either:
- domiciled in Ireland OR
- not resident in the USA.
So if an Irish resident inherits property located outside Ireland from a USA resident there will be NO liability for inheritance tax in Ireland. The USA will have charged federal estate tax on the property. Revenue do not need to be informed.
- Irish Inheritance Tax on UK Property
It’s a bit more complicated with a UK property – so you may well need to involve a solicitor or tax specialist.
There is a treaty between Ireland and the UK that covers CAT in Ireland and Inheritance Tax in the UK.
The main points of the treaty are as follows:
- Ireland will give credit for any inheritance tax paid on the UK property
- The credit given cannot be greater than the Irish tax due.
- The person who paid the double tax will receive the credit.
- If you received UK property, you can receive a credit if you paid UK tax on that property
Complications can arise because the UK will apply tax on the estate whereas in Ireland the beneficiary is responsible. The result is that different people may be liable for the taxes in the two countries.
Different currencies also apply, so UK tax paid will have to be converted to euro at the rate of exchange at date of payment and estate value converted at valuation date (per Irish CAT legislation) at the applicable rate of exchange.
The credit is given to the person liable to the UK tax and that is normally the person who inherits an estate, after all other costs have been paid. This person, who is called the residuary legatee , must also be liable to Irish CAT to claim the credit. If he/she pays no Irish CAT, the credit is lost.
More information on Inheritance tax is available from
National CAT Information Unit
City Centre/North City PAYE District
Central Revenue Information Office
Telephone opening hours: 10.00 to 12.30 Monday to Friday
Call – 1890 201 104
UK Inheritance Tax (Figures from 6/4/19)
In the UK the tax is charged on the estate , not on the recipients.
The rate of inheritance tax in the UK is 40% on anything above a £325,000 threshold.
But – the threshold doubles to £650,000 for a married couple – as long as the first person to die leaves their entire estate to their partner.
If someone owns a home – their tax-free threshold can increase to £475,000 if:
- the home is passed on to children (including adopted, foster or stepchildren) or grandchildren,
- the total estate is worth less than £2 million
(This is doubled to £950,000 for a married couple – as long as the first person to die leaves their entire estate to their partner)
So an example : – someone in the UK passing on a property worth £830,000 to two children. (The deceased parent is the second parent to die and the first parent to die left their entire estate to their spouse)
The total inheritance tax threshold is £950,000 – so there is no inheritance tax bill.
A similar situation in Ireland (see above) on an €830,000 house – would result in an inheritance tax bill of €52,800 in total, or €26,400 per child.